Determinants of Supply in Competitive Markets - Edubirdie

University:
California State University, Northridge
Course:
ECON 160 | Principles of Microeconomics
Academic year:

2023
Views:

13

Pages:

2
Author:

Mahmoud M.

Microeconomics notes Determinants of Supply In the short run, firms will only increase output as profits increase. Conversely, if profits fall, the firm will reduce output by. Taxes and subsidies. Short-Run Supply Curve The supply curve shows how much a firm is willing to supply at any given price. Profit maximization policy takes us to the short-run supply curve. In price, the firm sets output where P = MR = MC. Company resets this output ... Changes If there is a decision on the supply curve, the supply curve changes. A change that lowers the price shifts the supply curve to the right. Tax Effect If Tax increases MC, the firm will reduce production. If not, it will only reduce the results. Competitive Markets If a market is efficient (consumers love products), it attracts new firms and existing firms expand. This leads to lower prices and lower profits, with some businesses old and new going bankrupt. Market Supply Curve Each firm's supply curve is its marginal cost (MC) curve. The supply curve is equal to the MC curve of each firm. Entry and Exit Entering or exiting a business is incredibly easy. If the company enters (especially from the profit market), the stock market shifts to the right and the price drops. The money market narrows as prices fall, and when it drops to zero, outflows stop. Economic profits favor new companies. It shifts to the right and the value decreases. Operating income declined and new inflows stagnated. Business stabilized with zero economic profit. Bankruptcy fires companies Change changes, prices rise Economic recession, innovation stops. The market is stabilized by higher prices, fewer producers, and zero revenue. Characteristics of the Best Business Many companies do business. Same product Excellent words. Profits are high when MC = P (= MR). Fewer restrictions on entry and exit. Zero economic profit.

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